System Shock 2 was not really big on labels to begin with. It looked and controlled like a first-person shooter, but it had the character growth and customization of an RPG and a developed inventory system. Underneath all these elements, there was a sense of horror and tragedy that permeated everything. Like many games before it, the story of lives ruined or ended unfolded through the logs and journals of those left behind.

The team at Irrational Games wasn't looking at Resident Evil or Alone in the Dark for guidelines, but when faced with the challenge of making a truly scary game, they came to the same conclusion. They identified two main elements, isolation and vulnerability, as being the key themes in the story and gameplay that contribute to fear. Trapped on a space station and surrounded by corpses, the player felt helplessly alone, and with minimal resources and abilities, death was always looming. Immersive and sometimes deceptive use of sound and lighting helped to reinforce the sense of dread with a strong audiovisual component.

System Shock 2 was only moderately successful and not terribly influential in its time. The survival horror genre didn't need to change yet, and companies were making money just fine with their Resident Evil clones. As the years advanced, horror games slowly decreased in sales, and gamers stopped responding to the same tricks. Only then would more progressive games have a chance to change the direction of the genre.

Around the same time that Infogrames was preparing their revival of the Alone in the Dark franchise, series' creator Frederick Raynal was finally returning to the genre he helped to create with an original survival horror game called Agartha. In addition to the detailed 3D environments and impressive flashlight effects, Raynal brought with him some fresh ideas about how to disturb the player in ways only a game can.

The bond a gamer shares with his on-screen avatar is different than a viewer watching a character in a movie. The player owns the avatar's decisions, and this can be a powerful tool. Raynal and his team at No Cliché decided to play with this by weaving in and out of parallel story threads based on the moral choices made by the player. There was one central narrative that told a very personal story, and the good and evil threads would progress according to the player's decisions. Some of these actions were disturbing, forcing the player to acts of murder and betrayal. "The goal was to scare the player with what he thinks he will have to do to achieve his goals even before doing it," Raynal explains.

Unfortunately, Agartha would never see a release. In the wake of SEGA's troubles with the Dreamcast, they shut down No Cliché and terminated the project deep into its development. The ideas about morality as a device for horror games weren't lost entirely, though. Bioshock would later make these kinds of decisions a prominent theme.

During the years that followed, the line between action and survival horror gradually blurred, as horror games abandoned the slow movement and stiff controls long associated with the genre. One of the first to throw down the gauntlet was id Software. Long known for their cutting edge action games, id was no stranger to horror. Despite falling outside of the "survival horror" criteria, the original Doom and Quake were gritty action games with hellish imagery, known to scare the crap out of more than a few players. When it came time to reinvent Doom for a new generation, horror was moved to the front and action took a backseat.

Doom 3 made a conscious effort to be more narrative and less abstract than its '90s predecessors. Once again, the designers found themselves returning to Project Firestart's technique of telling a story through messages left behind by others, but there were also bits of dialog and other first-person storytelling reminiscent of Half-Life. The environments were made to be a believable space station, different from the labyrinthine and purposeless levels of the original Doom.

The cutting edge engine lent itself perfectly to the change of pace. In cramped, indoor environments, the Doom 3 engine was capable of incredible feats of dynamic lighting. Everything could cast shadows in real-time and lights could move and flicker. In a move similar to Alone in the Dark 4, players were given a flashlight to pierce the darkness, forcing them to balance firepower with a good view of their surroundings – quite counter to anything id had designed before.

The move to survival horror left some fans cold, but most critics recognized it as a conscious decision to do something different and applauded its effectiveness. Controversy aside, Doom 3 was a huge hit, selling more than 3.5 million – enough to make others think twice about their approach to horror games.

For its entire development, Resident Evil 4 lived at the crux of this controversy. Early on, Shinji Mikami's team toyed with the idea of Leon Kennedy becoming infected and slowly losing his humanity, as well as with the idea of following in Silent Hill 2's footsteps and adding nightmarish visions and an otherworldly stalker. Even after some promising prototypes and strong early buzz, Mikami realized that the only way to really bring the series back would be to rebuild nearly from scratch.

The zombies that were the series' hallmark were given the boot, replaced with infected (or infested) that could run, speak, and work together. The camera was moved to an over-the-shoulder view, completely changing the dynamic of the shooting and allowing for more precise aiming. The claustrophobic interiors the series was known for were traded for a number of larger, more open areas, and the enemy count was ramped up to match.

There's no denying that Resident Evil 4 was a major breakthrough for third-person shooters. What isn't as clear is if it was the right direction for survival horror. At the time, Resident Evil 4 received nearly universal praise, and is still considered one of the best games of the generation, but something was lost along the way. "By going more toward an action game," Frederick Raynal explains, "you give that power to the player so each time he sees a monster he says 'Come on, I'll kick your ass' instead of running away." Resident Evil 4 was fine for the time it was released, but in the years that followed, many third-person shooters built on the ground it had broken, and Capcom found that they were no longer at the top of the heap. In an effort to keep up with games like Gears of War, they released Resident Evil 5 as a two-player cooperative game, abandoning the isolation element after already sacrificing the feeling of vulnerability in the previous game. They released their game to a market already crowded with third person shooters, and this time critics were left wondering what happened to the horror.